Oil Prices: This Could Send Energy Prices Soaring (Video)

Oil-PricesYou would not know it from the mainstream media rhetoric, but the White House and the Kremlin agree that the collapse of the Syrian Arab Republic (al-Assad’s government) would plunge the whole region, including Israel, into chaos. And it’s the one key factor that could determine the future of oil prices.

By intervening, Russia wants to resume a protagonist role in the region, centered on Syria, a close Moscow ally during the Cold War. While Russian weapons have made much noise in Syria, Russian diplomacy has pursued a new relationship with the Saudis. After an extended period of hostility, the Saudis themselves have found it necessary to work with Moscow.

The United States, Russia and more than a dozen other nations have agreed on a ceasefire in Syria following marathon talks in Munich. Alessandro Bruno, analyst with Profit Confidential joined CTV News Channel with his analysis.


Posted by CTV News Channel on Friday, February 12, 2016

Syria is a key indicator of where oil prices are headed. Geopolitics is still central to the oil market.

Traditionally, geopolitical tensions in the Middle East raised oil prices. Now, tensions are lowering them. This is because since the 1970s, when OPEC (the Organization of the Petroleum Exporting Countries) reigned supreme, the U.S. and Russia have become significant players in the oil market.

As an oil producer and a rentier state (almost), Russia has many shared interests with Saudi Arabia and the other Gulf monarchies. The Russian leadership can deal with the Saudis. But they have different overall goals for Syria. Together, Russia, Saudi Arabia, and Iran can then discuss how to move Brent oil prices back up.

The situation in Syria is a barometer of Russian-Saudi relations. Periods of ceasefires spell the possibility of talks and agreements. In oil terms, this means production cuts, pushing prices higher. Saudi Arabia’s ultimate goal is to squeeze out the most expensive producers, such as Russia and the United States. As shale oil production in the United States continues, even if at a lower level, OPEC will exercise more, rather than less, pressure.

The International Support Group for Syria’s meeting in Munich last week appears to have sidelined the influence of “neo-conservative” and “liberal hawks” over the White House. President Obama appears to have taken back control of Syrian policy.

The final declaration provides for a free flow of humanitarian assistance and a cessation of hostilities. However, the agreement also allows Russian military action against the Al-Nusra Front and Islamic State to continue. Russia has also been frank about its plans to continue targeting Ahrar al-Sham and Jaysh al-Islam, two rebel groups it considers terrorists.

Since September 30, 2015, Russia has led a major effort to attack ISIS and similar groups in Syria. Russia is deeply concerned that it has to stop these groups. Four months later, most of the Islamic State’s weapons factories and underground bunkers have been destroyed. The Syrian Arab Army, or al-Assad’s army, has intensified a ground operation since January 6 of this year. It has made strong gains on various fronts, though not the northeast. Meanwhile, Saudi Arabia and Turkey have been resupplying the so-called opposition from the north.

During a press briefing, also featuring U.S. Secretary of State John Kerry, Russia’s minister of foreign affairs, Sergei Lavrov, stated that his country considers Ahrar al-Sham (the “Islamic Movement of Free Men of Syria”) and Jaysh al-Islam (“The Army of Islam”) to be terrorist groups. Ahrar al-Sham is financed by Turkey and Qatar and has Pakistani military instructors. It has claimed ties with the Afghan Taliban. Jaysh al-Islam is funded by Saudi Arabia and is said to be “proud” to share Osama bin Laden’s “ideals.”

Saudi Arabia and France will not disarm. Saudi Arabia insists that there will be no peace in Syria while President al-Assad remains in power. The kingdom and France have accused the Syrian Arab army and its Russian ally of bombing civilian targets. Turkey, which is conducting what might be described as “paranoid politics,” is not interested in the Islamic State as much as the Kurds. It has continued to attack them in the north.

Meanwhile, Turkey has accused Russia, without proof, of targeting civilian hospitals. Yet Turkey has been bombing Syria for days and targeting the same areas as the Russians. In other words, they could just as easily have hit the hospitals as the Russians. Turkey’s excuse is flushing out Kurdish rebels protected by YPG. The Russian backed Syrian army is reaching Aleppo. Once it arrives, it will effectively cut Turkey’s supply lines with various rebel groups.

This is the worst possible scenario for Ankara, especially with President Erdogan keen on eliminating the PKK (a Kurdish group considered terrorists by the U.S.) and the YPG (openly supported by the U.S. in the fight against the Islamic State). Turkey is afraid that the YPG is within short distance of building an embryo state on the border. Indeed, there is every reason to suspect that Turkey will continue bombing Azaz (where the hospital was).

For now, it is holding back on invading Syria. Doing so would make Turkey a target of Russian forces and irritate its NATO allies and the White House.